Friday, January 20, 2006

George Will Had it Right on Master Settlement Agreement: Attorneys General are the Ones Out of Touch with Reality

In a New Year's day op-ed column entitled "The State's Tobacco Addiction," George Will argues that the Master Settlement Agreement (MSA) between 46 state Attorneys General and the major tobacco companies in 1998 was little other than a financial windfall for trial lawyers (who netted "$13 billion in fees" and a political windfall for the Attorneys General, who enabled "their states to finance this and that with billions paid by smokers, who are disproportionately low-income people."

Will also argues that the major effect of the MSA was to make the states dependent on tobacco revenues to fund a variety of essential government programs and that it thereby created a financial incentive for the states not to take any action that would decrease cigarette consumption (and therefore incoming revenues to the state).

"The states' ability to continue treating the tobacco industry as a 'budgetary Alaska' -- the last frontier for exploitation -- depends on brisk sales of cigarettes far into the future. So all 50 states, which in 2004 reaped $12.3 billion in cigarette taxes, have an incentive to carefully calibrate these taxes so as to maximize revenue. They want high taxes, but not high enough to cause large numbers of smokers to quit the habit that is so lucrative to states."

In response to Will's column, Attorney General Tom Miller of Iowa and Attorney General Lawrence Wasden of Idaho, who is on the Board of Directors of the American Legacy Foundation (recipient of much of the MSA funding) published a letter in which they countered Will by stating that: "The tobacco Master Settlement Agreement (MSA), which arose from the settlement of litigation that state attorneys general brought against the major tobacco companies, is primarily a public health agreement that contains the strongest restrictions on tobacco advertising and promotion ever implemented in this country."

They also accused Will of repeating "the canard that the states have an interest in maintaining cigarette smoking because MSA payments and state excise taxes exceed the costs of treating tobacco-related disease."

The Rest of the Story

I've been around tobacco control for a long time (and a lot longer than either of the Attorney Generals who provided their wisdom here) and I can tell you that on this particular issue, George Will is precisely correct, and it is in fact the Attorneys General who are completely off base.

First of all, the MSA is by no means primarily a public health agreement. In fact, it is, as Will suggests, primarily an economic and political agreement that provided the tobacco companies with resolution of potentially damaging and ongoing litigation as well as with the benefit of a financial partnership with the states. And it provided the Attorneys General with a huge political windfall. They could claim that they had stood up to Big Tobacco, when in fact, they had forged a compact with the major companies by which they became financially dependent upon cigarette revenues to build bridges and highways, treat sick patients, and balance budgets. And of course they could tout the huge amounts of money that they had brought back to their states.

But there has been, in my opinion, no lasting public health benefits from the MSA. The only potential benefit -- a major national anti-smoking media campaign -- was doomed to failure by the MSA itself, since the Attorneys General themselves agreed to a provision that ended funding for this program if the non-participating manufacturers gained more than 1% of the market, which has occurred.

On the contrary, I view the MSA as the worst public health blunder of my lifetime.

The advertising restrictions in the MSA, which Miller and Wasden boast about, are ridden with loopholes and have done almost nothing to reduce youth exposure to cigarette marketing. In fact, according to the Federal Trade Commission, cigarette marketing expenditures are now at an all-time high!

And worst of all, by making the states financially dependent on tobacco revenues, the tobacco companies have brilliantly created a situation in which the states have a vested interest in preserving cigarette consumption. This is the worst possible public health outcome that could ever have occurred.

Second of all, the "canard," as Miller and Wasden call it, that the states have an interest in maintaining cigarette smoking, is actually quite true, and this fact has been borne out time and time again, including by the very actions of Miller and Wasden themselves!!!

The rest of the story is that Miller and Wasden in 2003 (along with other attorneys general) intervened in an Illinois tobacco court case, submitting an amicus brief to a trial court judge urging him to reduce the $12 billion appeal bond he had ordered Philip Morris to pay, as specified by Illinois law, after the company was found guilty in a class-action lawsuit.

In intervening to protect the financial well-being of Philip Morris, Miller and Wasden wrote: "Defendant Philip Morris has informed the States that the $12 billion appeal bond required in this Court'’s March 21, 2003 Judgment may prevent it from making the $2.6 billion payment to the States that the MSA requires it to make on April 15, 2003. The States submit this brief to advise the Court that many State programs, including vital public health programs, depend on MSA payments for their support and to urge this Court, after a full assessment of Defendant'’s financial condition, to exercise its discretion to set an appeal bond that does not interfere with the States'’ vital interests. ... The States have a strong interest in preserving the value of the settlements they fought for and won, and the results in this lawsuit should not prejudice those settlements."

In other words, Miller and Wasden were arguing that because the legal remedy awarded to plaintiffs in Illinois - under the judicial system and laws of Illinois and under the United States Constitution - affected financial payments to their states, the judge should alter the application of Illinois law to protect their state's financial interests, and that concern should override the pursuit of justice by these citizens under the laws of Illinois.

So much for the interest in reducing tobacco use outweighing the financial interests of the states in protecting the financial conditions of the cigarette companies!

The insincerity of Miller and Wasden is overflowing in their letter. How can they seriously attempt to convince us that fighting the tobacco companies and protecting the public's health is their primary concern when they went to bat for Philip Morris, intervening and interfering in the pursuit of justice by a class of citizens in another state, all in an effort to protect the financial welfare of the nation's leading tobacco company (so that their own states' financial status would not be affected)?

That Attorney General Wasden is on the Board of the American Legacy Foundation is a shame, because it is difficult to see how someone who has gone to such lengths to protect the financial interests of Philip Morris belongs on the Board of such an organization. I think that pretty much dooms you from the start.

Politicians should simply not be directing such a public health organization. The conflict of interest is simply too large to bear. Unfortunately, the Attorneys General have written this conflict of interest into the law, because they included in the MSA a provision that they (the National Association of Attorneys General) would select 2 of the members of the Board of Directors of the American Legacy Foundation. Talk about a recipe for failure. The last thing we need is politicians running the show in public health.

The rest of the story is that Attorneys General Wasden and Miller are talking out of both sides of their mouth. While they try to convince the public that they have fighting Big Tobacco and protecting the public's health as their primary interest, they fail to disclose that at the same time, they intervened to protect the financial well-being of the nation's largest tobacco companies, that they signed a deal that ensured that any possible effects of an anti-tobacco media campaign would be short-lived, and that they agreed to include in their settlement provisions that watered down the advertising restrictions enough so that they would have no meaningful effect, resulting in never-before seen tobacco industry marketing expenditures and unencumbered tobacco industry marketing to youths.

I don't find myself agreeing with George Will very often, but I think he is right on the mark on this one. And the Attorneys General have shown that they have no concept of what tobacco control is all about.

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